Tài liệu The_portfolio_chef_satisfy_your_investment_appetite

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THE PORTFOLIO CHEF Copyright © Nancy E. Woods, 2004 Published by ECW Press 2120 Queen Street East, Suite 200, Toronto, Ontario, Canada M4E 1E2 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form by any process — electronic, mechanical, photocopying, recording, or otherwise — without the prior written permission of the copyright owners and ECW Press. Nancy Woods is an Investment Advisor with BMO Nesbitt Burns Inc. Opinions are those of the author and may not reflect those of BMO Nesbitt Burns. The information and opinions contained herein have been compiled from sources believed reliable but no representation or warranty, express or implied, is made as to their accuracy or completeness. National Library of Canada Cataloguing in Publication Woods, Nancy, 1961The portfolio chef : satisfy your investment appetite / Nancy Woods. Includes index. ISBN 1-55022-589-8 1. Investments. 2. Portfolio management. I.Title. HG4521.W66 2003 332.67'8 C2003-902200-5 Editor: Tracey Millen Cover and Text Design :Tania Craan Cover Photo: Richard Beland Illustrations: Heather Vassallo Production: Mary Bowness Printing: Marc Veilleux Imprimeur This book is set in Akzidenz Grotesk and Joanna The publication of The Portfolio Chef has been generously supported by the Canada Council, the Ontario Arts Council, the Ontario Media Development Corporation, and the Government of Canada through the Book Publishing Industry Development Program. Canada Distribution Canada: Jaguar Book Group, 100 Armstrong Avenue, Georgetown, ON, L7G 5S4 United States: Independent Publishers Group, 814 North Franklin Street, Chicago, Illinois 60610 2345 Printed and bound in Canada ECW PRESS ecwprcss.com THE PORTFOLIO SATISFY YOUR INVESTMENT APPETITE CHEF NANCY WOODS INVERSTMENTADVISOR ECW Press This page intentionally left blank For Bryan, Cortney, Megan, Tyler, and Gavin, who I actually cook for every day This page intentionally left blank The book you are about to read started out as something to do at 2:30 in the morning. I had a long period of insomnia. After making lunches and cleaning the house as quietly as I could, I sat in front of the computer and typed out my ideas. Numerous times I have heard Oprah Winfrey and author Cheryl Richardson say that everyone has a hidden passion inside of them. The Portfolio Chef seems to be mine. This is not a personal finance book, but an investment book that teaches readers how to make well-informed decisions. The Portfolio Chef could not have been completed without the help of numerous people, who I would like to thank. Jack David, who had the wisdom to gamble on something other than poker; Tracey Millen, who let me constantly badger her with questions and who punished me with sticky notes; Tania Craan, for her designer's eye; Heather Vassallo, for her artistic eye; Richard Beland, for his photographer's eye; Nellie Kee, for her investing prowess and for teaching it to me; Greg loannou and Eva Blank at Colborne Communications; professional tax accountants Lewis DeMoss and Alex Montero, who kept me current on American retirement plans; Gord Ward, who exercised the engineer exactness in him to check the manuscript's technical accuracy; Bill McNeill, Bill Haldane, Tammy Carpenter, Kevin Burke, Brenda Wilson, and Keith Edwards at BMO Nesbitt Burns; Donald Coxe at Harris Investment Management; Tony North at Standard and Poor's; Nancy Lockhart at Frum Development Group; Ralph Acampora at Prudential Financial; Bill Carrigan at the Toronto Star; numerous family, friends, and neighbors, who always encouraged me and let me test my recipes on them; and my clients, who let me be their chef. This page intentionally left blank Menu/Table of Contents SECTION ONE INGREDIENTS Under the Canape: Appetizers/Savings Bonds and GlCs 3 The Yeast You Know: Breads/Exchange Traded Funds 6 Where's the Beef? Meat/The Blue Chip Foundation D The Starch Staple: Potatoes/Bonds and Fixed Income 2O Caesar's Pieasers: Salad/Utilities 28 Eat All Your Greens: Vegetables/Growth Companies 31 Ripe for the Picking: Fruits/Preferred Shares 35 Mother's Soup for a Cold: Soup/Banks and Financials 41 Charlie the Timely Tuna: Seafood/Specialty Companies 47 Italian or Chinese Tonight? Ethnic Foods/Foreign Funds SO Sweet Tooth: Desserts/Highly Speculative Stocks 55 Something to Whet Your Whistle: Beverages/Resources 59 Once You Start, You Cant Have Just One: Snack Foods/Initial Public Offerings 65 Pop, Pop, Pop: Popcorn/Internet Stocks 69 Parsley, Dill and Carrot Curls: Garnishes/Gold Stocks 72 Pour It On: Gravy and Sauces/Foreign Exchange 75 To© Hot for Me! Spices and Seasonings/Derivatives 79 SECTION TWO PREPARING AND EATING YOUR MEAL Generic or Name Brand? Grocery Stores/Broke rage Houses 91 Your Menu, Sir: Menu/Technical Analysis 95 Where's Walter? Personal Chef/Investment Advisor 97 Would You Like Fries with That? Fast Foods/Mutual Funds 103 It's a Wrap: Wraps and Sandwiches/Wrap Accounts or Managed Money HO Serve Yourself: Self-Serve/Online Investing 113 What's That on Your Plate? Balancing Your Diet/Asset Allocation 116 What's That Moldy Thing in the Fridge? Throwing Out Leftovers/Taking Losses DO Watch Out: Calorie Counters/Watching Your Portfolio 126 TV or Microwave Dinners: Frozen Foods/Market Corrections 129 All You Can Eat: Smorgasbord/Over-Diversification 131 Would You Like an Inside or Outside Table? Tax Shelters/RSPs and IRAs 134 Just Say I Do: Banquets and Weddings/Company Pensions or 401 Ks 137 The No-Meat Diet: Vegetarians/Ethical Investors 139 Don't Throw That Out! Leftovers/Estate Planning 141 What's for Dinner Tomorrow? Final Tasting/Fine-Tuning Your Portfolio 145 Let's Start Cooking Recipes for the Investor Food: we can love it and hate it at the same time. Money: we can love it and hate it at the same time, too. As soon as we are bom we instinctively start to suckle, looking for food. Later, when we are introduced to solid foods, we eagerly eat what we are fed. If a baby is fed only rice cereal, he is still content because he does not know that other foods exist. Once that baby is introduced to other foods, he will start to learn what he likes and what he doesn't. Novice investors should follow a similar pattern. Yet most are at the infant stage, only investing in what they know and believe to be safe — usually the ever-coveted GIC (guaranteed investment certificate). Do you want to limit xi yourself to just one type of investment, or expand your tastes to the other flavors of the world? Once you have begun to save money, your next step is finding out how to make money from your savings. The way you invest should be like the gradual introduction of new foods to your diet. As you gain more experience and increase your knowledge, the easier it will be for you to make wise decisions. A portfolio is very individual and everyone has a different level of risk tolerance — the amount of risk you are able to handle comfortably. Some people are able to dive into bird's nest soup with their eyes closed and their mouths wide open, while others cautiously sip from their spoon to see if they like it, or won't try it at all. Making informed decisions will help you feel more comfortable about whatever route you take. Throughout the process of adding more and more kinds of foods to your investment meal, check that you do not have too much of any one kind. It Do you read the financial is important that you have a section of the newspaper we ll-balanced meal, so avoidQ first? if so, then you mig too mudl meat (stocks)j be ready to take the next investing step. potatoes (bonds), or vegetables (growth stocks) on your Xii plate. You might be tempted to look at the dessert menu before deciding on your main meal, but like any nutritious diet you must have the basics first before indulging in the treats. Every chef and investor has to begin I strongly suggest you never have somewhere. You can't more than 1O% of your portfolio in expect to start cookany one stock holding. Following ing with delicate this rule decreases the risk of a truffles without prior substantial loss of wealth if that culinary experience. one holding were to collapse. You need to understand the cooking terms and methods before turning on the stove. Like many people, you probably have spoken to a financial advisor or stockbroker, or attended a financial seminar. After listening to the information, how many of you have asked yourself or your partner, "Did you understand everything or anything we just heard?" There is no shame in admitting that the lingo and concept of most investments can be confusing and outright foreign. Growing up in a financial environment, I always thought my parents were speaking a different language. It has taken me years to truly understand the jargon and nuances of the investment world, and I am still learning. There are Xiii always new products being developed, new investments designed to be better than the last, and newer, faster ways to make your money grow. Once you understand the basic concepts behind investing, figuring out the other complex strategies will be a lot easier. This book is divided into two parts: Section One, "Ingredients," looks at the various food types available; Section Two, "Preparing and Eating Your Meal," explains how to use the various ingredients to create a healthy and well-balanced portfolio. Several of the ingredients chapters have two parts to help you build your investment knowledge: the first part explains the basics of what the investment is and how it works, while the section called "Now You're Cooking!" is for the more experienced or adventurous investor. Similar to going to restaurants for more elaborate or convenient meals than we can prepare ourselves, investing may require a professional advisor. Especially during the early stages, it would be helpful to find an advisor who is willing to spend the time to explain the elements of your portfolio. As this book will help you gain knowledge, use it to be a well-informed investor who is always willing to taste, and sometimes re-taste, the many flavors of the investment world. XIV SECTION ONE INGREDIENTS This page intentionally left blank Under the Canape Appetizers/Savings Bonds and GICs Once you have decided that you want to earn something from the money you have saved, the first step is to gain experience. This is the appetizer to your meal. A good way to start investing is to buy a Government Savings Bond or a Guaranteed Investment Certificate (GIG). Both are extremely safe in regards to protected capital or initial investment. Generally, they are cashable at specific times for their face value and accrued interest. Accrued interest is the amount of interest to which you are entitled depending on the amount of time you have owned the savings bond or GIG. Most GICs are not redeemable prior to their maturity date. Some financial institutions offer GICs that are cashable after a pre-determined time; however, the rate may be lower than that of 3 a locked-in GIG as a cost o flexibility. Savings bonds may be cashable anytime, with only the previous full month's interest or semiannual interest being earned. The specifics are defined when the bonds are issued. Check each issue carefully and try to foresee if you will be in need of the money before the maturity date. There are other twists and tastes to the simple cheese and cracker hors d'oeuvres. Some bonds offer an interest rate that rises the longer you hold them. This is called a step-up feature. It is a good idea to find out the average rate of return if the bond is held to maturity, and to compare it to a bond that has a fixed rate over a fixed term. You can also decide whether you want the interest to be paid to you each year or reinvested into the bond. The latter option is called compounding the interest. For example, the face value that you buy is $1,000 and the interest after one year is $50. With compounding interest you do not receive the $50; instead it is added to the bond and the next year's interest is calculated based on DEFINITION OF ACCRUED INTEREST Amount of interest you are entitled to, which has accumulated since the last interest payment. 4
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